Published on December 7, 2023, 1:56 am

The Supreme Court recently welcomed a low-profile case of immense significance, Moore v. USA, challenging the legality of taxing unrealized gains – what many commentators call “wealth taxes.”

This lawsuit entails discussing a tax policy applied to Charles and Kathleen Moore, which echoes parallels with ‘wealth taxes.’ The tax under dispute targets unrealized monetary gains that exist primarily on paper.

Previously, the Moores invested in KisanKraft – a company purposed to aid India’s rural farmers by importing American-made tools into India. Participating with $40,000, they received approximately 13% of the company’s common shares.

Attracted by demand for American farming tools in rural India, KisanKraft reinvested all its profits in growth. While not receiving any distributions or dividends from KisanKraft during this phase, a rapid appreciation in their investment grew on their balance sheet alone. Nonetheless, their actual wealth never realized these increases.

However, after 12 years of smooth journeying came an unexpected turn: the Internal Revenue Service (IRS). Pursuant to Sections described in Tax Cuts and Jobs Act of 2017 called the “Mandatory Repatriation Tax,” the IRS insisted that the Moores pay tax on their share from reinvested earnings dating back 12 years, as those were deemed “income.”

This move perplexed the Moores who hadn’t realized or received any such income. Nevertheless, they had to declare an additional $132,512 as “taxable 2017 income” and pay $14,729 more tax.

According to U.S Constitution’s limitations on federal government’s taxation power codified under constitutional provision within the historical definition of “income,” realization is requisite — indicating clear control or possession by an individual being taxed.

Contradicting this conventional stand point though are Democrats including Sen. Elizabeth Warren who argue that taxaion can be exercised on any unrealized gains without the need for realization — insisting that it’s not specified in the 16th Amendment.

This interpretation issue has far-reaching implications, such as Massive wealth taxes if evidence of significant gains within a year despite no realized profits. That would still demand payment even if markets crashed subsequently, wiping out those investments.

Lead counsel to the Moores, Andrew Grossman, expertly made their argument before the nine Supreme Court justices, emphasizing historical and legal precedent to show that “income” indeed requires realization.

Further backing this concept were two prominent Supreme Court cases cited by Grossman: Eisner v. Macomber (1920) which ruled that a stock dividend wasn’t income unless there was actual possession by the investor and Commissioner v. Glenshaw Glass (1955) which agreed on realization being necessary in defining ‘income’.

Nevertheless, IRS affirms its belief in unnecessary requirement of realization under 16th amendment leading to mounting suspense around how Supreme Court will interpret this challenge via Moore v. USA case hearing. The decision could empower Democrats to introduce wealth taxes based on unrealized gains or eliminate these efforts altogether causing distress among residents of blue states come Tax Day.

This case of supreme importance reported here showcases our commitment to delivering real news from a Christian worldview perspective on critical constitutional and taxation issues affecting every American bound by the same laws.